PC leadership candidates support refinery project despite rising cost

A whopping $7 billion hike in Alberta’s commitment to an Edmonton-area refinery has PC leadership candidates concerned, but they all support the project.

Documents released with the province’s annual report last week show cost over runs in the construction of the Sturgeon refinery — formerly known as the North West Upgrader — resulted in the provincial government committing to pay $26 billion in tolls to process bitumen it receives as royalties over the 30 year life of the project. Previously, the government had estimated the cost to taxpayers would be $19 billion.

Opposition critics are calling for an investigation into the escalating cost of the project, but all three men vying to be the next premier expressed strong support for the idea of processing more bitumen locally to address Western Canada’s insatiable appetite for diesel fuel and to keep jobs in the province.

Thomas Lukaszuk stressed that government must play a crucial role in ensuring the project goes ahead, likening it to the risk former Progressive Conservative premier Peter Lougheed took 40 years ago in using government resources to foster the development of the oilsands.

“We have to take a long-term vision,” the former deputy premier said. “This is not something we’re just doing for today, but something we’re doing for 20, 30, 40 years down the road. There will always be critics ... but if we’re serious about diversifying, there is a role for government to play.”

Jim Prentice and Ric McIver said they would have to look more deeply into the issue before taking a position, but both said there is great benefit in producing diesel in Alberta where there have been chronic shortages in recent years.

“There are obvious benefits — more products refined, more high paying jobs here, more tax revenues here,” said McIver. “But like any business it comes with risk.”

McIver said government should generally stay out of business, but noted that if it hadn’t broken that rule the oilsands industry that fuels the provincial economy and pumps billions of dollars into the provincial treasury wouldn’t exist.

Prentice said the project is important because it will increase the amount of bitumen upgrading in the province.

“I think the project has merit,” he said. “Clearly the project is important because the alternative is we continue, as Western Canadians, to buy diesel from American refineries,” he said. “Oversight of the construction project is another matter. We need to ensure it’s built in a cost-effective way.”

“It’s still a good project and a good investment for Albertans, especially when we look at the number of jobs, (and) the revenues, with regards to taxes,” she said.

Since the project was announced in 2011, costs jumped from an estimated $5.7 billion to $8.5 billion.

“We’re watching this very closely,” McQueen said. “We’re always concerned when there are cost increases, but we knew when the (capital-cost) increase happened a couple of months ago that there would be an effect on the toll.”

Liberal Leader Raj Sherman said there should be an auditor general’s investigation into the “astounding” $7 billion cost increase.

“The Alberta Liberals support the philosophy, but the implementation of it has been horrible and Alberta taxpayers are going to have to pay the price,” he said. “We need to find out what the heck happened here.”

NDP MLA Rachel Notley said the situation cries out for a review by an independent third party to determine what went wrong, but she said oilsands companies must be encouraged to increase the amount of bitumen upgrading in Alberta.

“I want to know why Albertans are getting such a bum deal — whether what we were told originally was a gross under-estimation for political reasons, whether there are new costs we should have been able to predict, or whether we negotiated a bad deal for taxpayers, or whether it is truly unavoidable,” she said. “This is fundamental to the future growth strategies of this province because most Albertans believe this resource is not here to be ripped out from underneath us to some market a long ways away where the vast majority of the profit just disappears into someone else’s pocket.”

Wildrose MLA Jason Hale said there needs to be better oversight of a project with so much at stake.

“They are gambling with Alberta taxpayers’ dollars and the ante keeps going up,” he said.

The refinery, under construction near Fort Saskatchewan, will be operated by a partnership between North West Upgrading Inc. and Canadian Natural Upgrading Ltd., a subsidiary of Canadian Natural Resources Ltd. Its first phase will process 50,000 barrels per day of raw bitumen under fee-for-service processing agreements with the Alberta government and CNRL.

Alberta will provide 75 per cent of the bitumen under the government’s bitumen-royalty-in-kind (BRIK) program.

As one of the province’s two flagship carbon capture projects, the refinery will capture carbon dioxide for use in enhanced oil recovery.

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